State Government Affairs
“Groups” 101: What Are the Groups and Why Should You Care?
March 15, 2022 | Liz Malm
January 28, 2021 | MultiState
It goes without saying that COVID-19-related legislation will dominate state policymakers’ time and attention in 2021. We expect to see activity related to COVID-19 liability, hazard pay, vaccination, and workplace safety rules. MultiState offers full monitoring of state and local activity related to pandemic response — explore it here.
Lawmakers in 21 states have already enacted legislation relating to COVID-19 liability protection into law. Additionally, the governors in Arkansas and Connecticut have issued executive orders providing limited liability protections. About half of the enacted state laws will provide limited liability protection generally to all businesses within the state assuming they follow industry guidelines and absent gross negligence. Other laws target specific industries for liability protection. The most prevalent targeted liability protections are for medical fields, including hospitals, testing facilities, nursing homes, and personal protective equipment manufacturers. The remaining laws target businesses deemed “essential,” government employees, those providing disaster relief/recovery operations, restaurants, higher education, public schools, and outdoor swimming pools. During the current 2021 state legislative sessions, 23 states have introduced limited liability protection legislation so far. These bills can be organized into three main categories: (1) general liability protections for all businesses in the state that follow current guidance and/or make good faith efforts to protect their customers and employees; (2) schools (both K-12 and state-sponsored higher education); and (3) health care. Politically, there are three notable states to pay attention to: Kentucky, Kansas, and Wisconsin. In all three of these states, the Republican- controlled legislatures have passed general liability protections for all businesses in the state and are waiting to see if Democratic governors will sign them into law. If any of these bills are signed into law they could be models for other states with divided governments to follow while considering how to address this issue.
We expect to see a variety of policy proposals in 2021 that focus specifically on essential workers, particularly proposals that would either require employers to pay essential workers hazard pay in addition to regular wages or set up Hazard Pay Grant Programs open to essential employers and employees. In 2020, nine states and New York City introduced legislation related to hazard pay. In 2021, nine states have already introduced legislation requiring the provision of hazard pay to essential workers.
Thus far, no states have enacted a hazard pay mandate, but Pennsylvania and Vermont have enacted hazard pay grant programs. In 2021, these grant programs will likely be a popular policy option with legislators as states determine how to spend funds received from the federal government. Additionally, reframing the focus of labor and employment legislation on essential workers amid their key role during the pandemic will be a popular option for state lawmakers.
Starting in late December, the United States began the largest scale vaccination distribution effort in its history. Each state decides how to distribute its own allotment of vaccinations to its residents. The first stage was fairly straightforward with states choosing to vaccinate front-line health care workers and long-term care facilities first. But subsequent phases of vaccine distribution have varied state-to-state with the biggest debate surrounding whether to vaccinate older populations or essential workers first. As states strive for fairness and equality in distribution, they’ve created complicated rules and penalties that have slowed down distribution of the vaccine in many places. As the supply of the vaccine increases and states work out the initial kinks of distribution, we’ll see vaccinations continue to increase in priority populations through the spring and hopefully widely available by the summer. Governors and state lawmakers know that thousands of lives and jobs are on the line, so a lot of focus will be on getting the vaccination distribution right.
On the flip side, eight states so far have introduced legislation prohibiting employers from requiring employees to be vaccinated.
In July, Virginia became the first state to enact comprehensive workplace safety standards to control, prevent, and mitigate the spread of COVID-19 in the workplace in the absence of stringent federal requirements. Since that time, California, Massachusetts, Michigan, and Oregon have also finalized COVID-19 workplace safety regulations and other states, like New Jersey, have enacted executive orders aimed at workplace safety.
A federal Occupational Safety and Health Administration (OSHA) mandate could mitigate some state activity on the issue, but we expect states to continue to introduce and enact legislation, regulations, and executive orders aimed at keeping workers safe into 2021.
State revenue forecasts were dire at the beginning of the COVID-19 pandemic, but state revenues have shown surprising resilience, and most states now have significantly improved outlooks. There is still, however, significant variability between states, in part due to the impact of COVID on their economies and due to differences in the structures of their tax systems (e.g., states without an income tax will not reap benefits from the runup in equities markets in 2020). Still, by our count, at least 17 states will likely have stable revenue forecasts for FY 21.
This information is rapidly changing, and it will continue to shift as states release more information through their budgeting process. The map below shows the likely fiscal situation for states in Fiscal Year 2021: stable, facing moderate challenges, or facing significant challenges. The determinations are based on the most recent revenue forecast from each state.
States will likely see more changes to revenues and their economies as a result of many unanswered questions: vaccine timelines, whether the economy grows as strongly as predicted, and importantly, additional federal stimulus funds to both individuals and states.
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress made a number of tax changes that are important to the business community, such as expanding net operating loss carrybacks and raising the limitation on the deductibility of interest (163(j)). These federal changes came after most state legislatures had adjourned or curtailed their sessions due to the pandemic. Additional changes to the IRC were made in the year-end omnibus budget package (“Consolidated Appropriations Act, 2021’”). Thus, conformity to the federal tax code will be a bigger issue in 2021 than it would otherwise have been, and state efforts to conform to or decouple from specific provisions of the Internal Revenue Code could have a retroactive effect for many business taxpayers. There are, of course, multiple personal income tax provisions in both federal laws that state legislatures will also have to address. Finally, in recent months there has been a new push by some for states to include some foreign income in their income tax base by conforming to federal GILTI provisions. This would be a significant policy change for states, who mostly decoupled from GILTI and have typically have only taxed domestic activity, but early rumblings suggest that some more progressive states could explore this idea moving forward.
Historically, bills that seek to tax ecommerce focused on expanding the sales tax base to include digital goods and services, but recently we have begun seeing lawmakers propose novel new taxes. For example, continuing a trend from last year, three bills have been introduced in New York that would levy new taxes on digital advertising services. New York, Oregon, and Washington have proposed taxes on businesses that derive revenue from the sale of user data (the New York and Oregon bills would both tax these sales at a rate of 5 percent, while Washington one would tax it at 1.8 percent). While Democrats have typically been more likely to introduce these kinds of tax expansions, but we have also seen a few digital goods taxes coming from Republican lawmakers as well. A Missouri proposal would amend the state constitution to eliminate the prohibition for expanding the sales tax base to certain digital goods and services. Politicians in Indiana are also considering a bill that would levy a surtax on social media companies.
Since many of these ideas have not been considered before, it is difficult to know how politically viable they could be. Many face significant administrative hurdles and legal challenges, but considering the fiscal hole that many states find themselves in, lawmakers may be willing to attempt to overcome these difficulties in an effort to bring in additional revenue.
Heading into the 2021 legislative session we speculated that Democratic lawmakers would push to levy new taxes on high-income earners, arguing that they had weathered the COVID-19 recession and they should therefore contribute the most to the recovery. We are now starting to see that forecast bear out. New York Governor Andrew Cuomo (D) included a temporary surtax on individuals making more than $5 million per year in his budget and two state senators have introduced bills that would establish new, permanent upper-income personal income tax brackets. Additionally, a new bill in Maryland would tax marginal income over $1 million at a rate of seven percent. We have not yet seen the formal introduction of any wealth tax proposals of the kind floated in California, but one could still make an appearance before the year is out.
After California’s comprehensive privacy law took effect in 2020, other states are looking to follow their lead and respond to consumer advocate’s demands for more control over personal data. Comprehensive privacy bills have already been introduced in Minnesota, Mississippi, Oklahoma, Virginia, and Washington. New York Governor Andrew Cuomo also included a “consumer data privacy bill of rights” in his budget proposal.
Congress made promising bipartisan progress on a federal privacy bill in 2019 before the pandemic derailed those efforts. With a new Congress in January, those efforts will be revisited. If an agreement is finally reached after multiple efforts over the past several cycles, that could quell state efforts to pass comprehensive privacy legislation. However, concerns regarding state enforcement authority in any federal solution will continue to be of interest to state policymakers.
In November, California voters approved a new privacy ballot measure that would, among other things, create a new California Privacy Protection Agency to enforce privacy laws, expand what entities are covered by existing privacy laws and what personal information is covered, grant a right to correct inaccurate personal information, and amend disclosure and opt-out laws. Those provisions could be tweaked in the upcoming session, although the ballot measure limits how much of the law the legislature can change.
Other data issues that are likely to gain traction in state legislatures this year include greater transparency in algorithms and artificial intelligence, regulation of facial recognition technology, and regulating how smart devices record and store information.
The reliance on internet access during the pandemic to teach students, connect workers, and even allow health professionals to diagnose and treat patients has showcased the disparity in the quality of broadband service in different communities. Policymakers in rural areas have been particularly vocal about their low-density populations and topography challenges that can make it difficult to install broadband infrastructure. Many states have proposed mapping studies to determine what areas are underserved. Some states, such as Colorado and Pennsylvania, have created or expanded grant programs, a trend that is likely to continue in 2021. Other proposals would allow local governments greater flexibility in facilitating broadband infrastructure, streamline land use and lease permitting processes, or allow the formation of nonprofit electric cooperatives to provide broadband service.
Following the death of George Floyd at the end of May 2020, state legislators across the country introduced hundreds of bills intended to reduce incidents of excessive use-of-force by law enforcement officers. The flow of legislation in 2021 has been if anything even greater, with 245 bills already introduced in 31 states as of this writing. These bills address a wide variety of specific reforms that experts have argued will reduce incidents of excessive force by police officers. Adoption and implementation of body-worn camera systems, new procedures and standards for the use of force, and changes to hiring practices have so far been the largest focus. Other major aspects of reform have also seen substantial volume, including transparency issues, new training criteria, demilitarization, and restrictions or bans on profiling.
The 2020 elections are particularly consequential for the upcoming once-a-decade redistricting process. In the next two years, state legislatures will use census data to redraw congressional and state legislative district lines. Of particular note in this process are the 39 states with political “trifectas” — where a single political party controls both state legislative chambers as well as the governor’s office — which will largely have free rein to redraw districts without input from the minority party. This year, Republicans hold 24 state trifectas and Democrats hold 15 trifectas. A handful of states have also outsourced the redistricting function to independent commissions with varying degrees of procedures to shield the process from political influence. Redistricting will have long-term political effects for each state, so expect this issue to receive a lot of attention. Explore MultiState’s resource on 2021 trifectas and additional analysis about redistricting.
Since California enacted AB 5 codifying the “ABC Test” to determine whether or not workers are considered employees or independent contractors, there has been a renewed interest in worker classification in states across the country which will continue into 2021. A variety of proposals have emerged and will be introduced across the states in the upcoming legislative sessions, including bills to enact “ABC Tests” in additional states; codify various other tests to determine whether workers are employees or independent contractors; and address worker misclassification across various industries.
March 15, 2022 | Liz Malm
March 8, 2022 | Morgan Scarboro, Ben Fallick, Elizabeth Johnson
February 9, 2022 | Liz Malm, Rob Shrum, Marvin Yates